Statutory audit

A statutory audit is an independent examination of an entity’s annual financial statements. At the end of the work we issue an auditor’s report that gives an opinion on whether those financial statements are fairly presented, in all material respects, in accordance with the applicable financial reporting framework.

Our financial statement audit work is planned and performed with reference to generally accepted auditing standards (GAAS) issued through the AICPA. Where an engagement relates to a public company, or is otherwise within the PCAOB’s remit, we plan the work with PCAOB auditing standards in mind. The financial statements we audit are commonly prepared under U.S. GAAP; for international clients we also audit or assist with IFRS reporting where that is the applicable framework. The precise framework is agreed with you in the terms of engagement and is identified in the auditor’s report.

The purpose of the audit is not only to meet a legal or contractual requirement. A well-run audit also gives the board, shareholders, lenders and other users a more reliable basis for decisions, and it gives management a structured opportunity to hear independent observations on the accounts and on the controls that support them.

Who it is for

Statutory audits are for companies and other reporting entities that are required, or that choose, to have their annual financial statements independently audited. Typical situations include companies whose lenders, investors or boards require an audit, groups that need a consolidated opinion, U.S. subsidiaries of international groups, and nonprofits that need a financial statement audit or a Single Audit under the Uniform Guidance.

Companies and other reporting entities preparing annual financial statements
Groups and multi-entity structures that need a coordinated audit
Subsidiaries whose parent or lenders require an independent opinion
Entities reporting under U.S. GAAP, or under IFRS where that framework applies

What is included

Planning and risk assessment tailored to the entity and its reporting framework
Testing of transactions, balances and disclosures that matter to the opinion
Consideration of going concern, subsequent events and related-party transactions
Group and multi-location coordination where this is part of the agreed scope
Clear communication of findings during the work, not only at the end

What you receive

The independent auditor’s report on the financial statements
A management letter of control observations and recommendations
Discussion of significant findings with management and, where appropriate, those charged with governance
A closing file that supports a more orderly engagement in the following year

Why it matters

An independent audit gives users of the financial statements a reasoned opinion from a firm that is not responsible for preparing the figures. That opinion is often a condition of lending, investment, licensing or good governance, and it is a matter of record for the directors who approve the accounts.

For management, the value also lies in the process: earlier visibility of adjustments, a written view of control weaknesses, and a set of financial statements that have been tested against a recognized framework. We have provided this work, as an independent practice, since 2001, and we are based in New York.

Group and multi-entity audits

Where the engagement covers a group or a set of related entities, we plan the work so that component information is examined on a consistent basis and in time for the group reporting deadline. The scope of each component, the use of other auditors if any, and the consolidation process are agreed at the planning stage.

Independence

We accept audit appointments only where we can maintain the independence that generally accepted auditing standards and the professional environment in the United States require. If you also wish us to provide accounting, tax or advisory services, we will tell you promptly whether that work can sit alongside the audit or should be declined or referred elsewhere.

How we work

Whether the engagement is a statutory audit or another assignment, we follow a clear sequence so that both teams know what happens next.

Planning: Every engagement begins with planning. We take time to understand the entity or project, the applicable reporting framework, the people who will rely on the report, and the dates that matter to the board, lenders or funders. Scope, responsibilities and a realistic timetable are agreed in writing before detailed testing begins. We also agree the information we will need from management, and the points at which we will update you as work progresses. Good planning reduces last-minute pressure and helps both teams work in an orderly way.
Risk assessment: Once we understand the entity, we assess the risks of material misstatement in the financial statements or, for a project review, in the expenditure and compliance areas covered by the terms of reference. This includes considering the business and its environment, the design of relevant internal controls, and areas that typically require judgment — such as revenue recognition, estimates, related-party transactions and going concern. The audit or review plan is then focused on those risks, so effort is concentrated where it will make the most difference rather than spread thinly across every account.
Fieldwork: Fieldwork is the stage at which we obtain the evidence that will support our report. Depending on the engagement, this may include inquiry of management, inspection of documents, analytical procedures, confirmations, observation and substantive testing of transactions and balances. We work as far as possible from records that are already organized, and we raise questions and interim findings as they arise so that surprises are dealt with during the assignment, not in the final week. Fieldwork may take place at your premises, at our office in New York, or through a combination of on-site and remote work, agreed during planning.
Reporting: When testing is complete, we evaluate the evidence as a whole, form our conclusions and discuss significant findings with management and, where appropriate, those charged with governance. For a statutory audit, the formal deliverable is the independent auditor’s report on the financial statements, usually accompanied by a management letter that records control observations and recommendations. For project or special-purpose work, we issue the report format required by the funder or the agreed terms of reference. We aim to explain our findings in clear language, so the report is useful as well as compliant.
Follow-up: Issuing the report is not the end of a useful engagement. We walk management through the observations in the management letter or project report, distinguish between matters that need prompt attention and those that can be planned into the next cycle, and remain available to clarify our findings. Where we are reappointed, lessons from the current period inform planning for the next one — including information requests, cutoff procedures and any control improvements you have made. Follow-up is practical: the aim is a clearer file, fewer recurring adjustments, and a more orderly engagement the next time around.

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